The nonprofit sector continues to grow faster than business or government. A small, but significant part of the U.S. economy, this collection of organizations is on the leading edge of service provision and knowledge generation—the new economy model. Private higher education and medical research and treatment institutions enjoy worldwide acclaim, and myriad nonprofit civic, human services, arts, environmental, and advocacy agencies are motivating forces in our dynamic and pluralist nation—a closely watched and widely emulated model of civil society.
As the sector grows in size and financial clout, policymakers and the public need information to assess the impact of nonprofits and ensure their accountability. Nonprofit leaders and boards of directors require information to understand their organizations’ economic and service niches as they plan for the future. With this edition of the Nonprofit Almanac, we unveil a new generation of data that will make this fluid and changing sector more transparent and easier to assess.
Nonprofits are known for providing services and receiving donations and grants. But they are also major employers that often contract with governments and charge fees to cover the provision of human services, health care, education, and other services. Indeed, nonprofits pay more wages than the wholesale, retail, transportation, or information industries. The sector contributed products and services that added $666 billion to America’s gross domestic product in 2006. They also draw on voluntary labor and donations that produce both public benefits and personal fulfillment.
Variety typifies this sector. Huge professionally managed universities, hospitals, and development agencies and small volunteer-run soup kitchens, choruses, and mentoring groups are all part of the nonprofit sector. Some rely more on fees and contracts; others, more on donations. Yet, many nonprofits are small and have few, if any, staff.
It is this mix of varying finances, public-service activities, and private benefits that gives the nonprofit sector its special character and makes it difficult to characterize or explain in strictly economic terms. Since nonprofits are largely tax exempt and more than half—public charities and private foundations—are eligible to receive tax-deductible donations, congressional scrutiny and demands for accountability and transparency are inevitable. Yet, the government does not allocate adequate resources for oversight or collect the data on nonprofits that it routinely does on other economic sectors. Incremental improvements are under way, however, and recent changes in government data sources benefit this volume, which builds on and goes beyond earlier editions.
Further improvements in nonprofit data sources also bode well for transparency and accountability. The required annual information returns, IRS Forms 990, can now be filed electronically. (See software developed by the National Center for Charitable Statistics at http://efile.form990.org.) The advent of electronically prepared Forms 990 will dramatically improve the quality, completeness, and timeliness of both state and federal nonprofit financial reports. Yet, since electronic filing is not yet universal, the full promise of better data still awaits.
Unfortunately, data on nonprofit employment are currently difficult to compile. States control researchers’ access, and some do not permit their data to be used in national estimates. While researchers have worked around these roadblocks, we must have better access to data on nonprofit employment and wages.
Another problem in compiling data is built into the North American Industry Classification System, which replaced the Standard Industrial Classification System. It lacks a designation for nonprofit organizations, which means that researchers must estimate the number of nonprofits in many categories.
Despite the caveats, this edition of the Nonprofit Almanac portrays a sector that is more robust than ever and shows its growing significance to the American economy.
As the number of organizations and their financial impact increases, the sector must be better understood so that its goals stay closely tied to the public’s needs and its resources are harnessed creatively and efficiently.
Elizabeth T. Boris
Director
Center on Nonprofits and Philanthropy
The Urban Institute
